• Nvidia stock still offers a compelling valuation even after its 170% rally this year, BofA says.
  • The bank highlighted Nvidia's software offerings as a catalyst that could drive the next leg of growth.
  • There are five reasons investors should view any decline in Nvidia stock as a buying opportunity. 

Nvidia has soared 170% year-to-date to become the largest company in the world this week, but the stock still represents an attractive investment opportunity — and any decline in the stock should be used as an opportunity to buy more.

That's according to Bank of America analyst Vivek Arya, who outlined in a note on Wednesday a handful of reasons investors should remain bullish on the chip maker that's powering the artificial intelligence boom.

"Nvidia stock's steep climb, up 50% just in CQ2 (vs. SPX up 4.4%) could make it vulnerable to near-term profit taking," Arya said. "But we argue any volatility likely to be short-lived."

These are the five reasons Arya is staying bullish on the stock.

  1. "GenAI hardware deployments are still only in Yr 2 of what could be a 3-5yr deployment cycle," Arya said, adding that the company has a $300 billion opportunity to capitalize on, which is about three times the size of Nvidia's expected revenue this year.
  2. "Benefits of NVDA's next-gen purpose-built Blackwell AI accelerator systems will start later this year, with solid demand/visibility across cloud customers," Arya said.

  3. "On-premise enterprise/sovereign AI demand plus software monetization in early stages," Arya said.

    "We believe recurring software services could open the next leg of growth, while strengthening its direct relationship over enterprise users," Arya said.

    Nvidia's potential to build a significant recurring revenue stream from its CUDA software offering is what drove Rosenblatt to raise its Nvidia price target to a street-high $200 per share on Tuesday.

  4. "Valuation compelling at 35-40x consensus and only ~30x PE on bull-case $5/sh earnings scenario," Arya said, adding that the stock is trading at a cheaper valuation today than it was last year.
  5. "Unlike the 'dot-com boom' that was funded by risky debt-taking, genAI deployment is a mission-critical race between some of the best-funded (cloud) customers," Arya said.

Arya reiterated his "Buy" rating on Nvidia stock and $150 price target, representing upside of 12% from current levels.

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